Bitfinex and Tether reached a $18.5 million settlement with the New York Attorney General (NYAG) over allegations that they hid the loss of commingled client and corporate funds and lied about Tether’s USDT reserves. Within ninety days of the agreement February 18, 2021 effective date, and on a quarterly basis thereafter for two years, the firms will be required to publish reports on the composition of Tether reserves. Without admitting or denying any wrongdoing, Tether committed to publicly share these reports.
A Swiss National Bank working paper proposes a token-based central bank digital currency (CBDC) system without distributed ledger technology. It shows how earlier-deployed, software-only electronic cash can be improved upon to preserve transaction privacy, meet regulatory requirements in a compelling way, and offer a level of quantum-resistant protection against systemic privacy risk. The CBDC proposed here is based on blind signatures and a two-tier architecture, that purportedly guarantees perfect, quantum-resistant transaction privacy while providing anti-money laundering and counter terrorism financing protections for society that are actually stronger than those of banknotes. Neither monetary policy nor financial stability would be materially affected because a CBDC with this design would replicate physical cash rather than bank deposits.
In a legal opinion on the European Union (EU) rules, the European Central Bank (ECB) said it should have the final word on whether a stablecoin should be allowed to launch in the euro zone. “Where an asset-reference arrangement is tantamount to a payment system or scheme, the assessment of the potential threat to the conduct of monetary policy, and to the smooth operation of payment systems, should fall within the exclusive competence of the ECB.” It added the proposed EU rules should be changed to say that its opinion on the matter is binding for national authorities assessing applications to issue stablecoins.
The Digital Currency Institute of the People’s Bank of China and the Central Bank of the United Arab Emirates have joined the m-CBDC Bridge central bank digital currency (CBDC) project for cross-border foreign currency payments. The m-CBDC Bridge initiative is run in partnership with the BIS Innovation Hub (BISIH), the Hong Kong Monetary Authority and the Bank of Thailand. It will further explore the capabilities of distributed ledger technologies by developing a proof-of-concept prototype to support real-time cross-border foreign exchange payment-versus-payment transactions in multiple jurisdictions, operating 24/7. It will analyse business use cases in a cross-border context with both domestic and foreign currencies.
Miners are frequently blamed for causing dips in the price of Bitcoin. These accusations are often unsubstantiated—worse still, they’re sometimes based on faulty metrics that conflate mining pool payouts with miner spending, ultimately misleading their users. This CoinMetrics research finds that, in line with the conventional wisdom, we find that miners tend to prefer Huobi and Binance to other exchanges, but flows from mining addresses represent a small percentage of total exchange inflows, about 5.5%, and are not a major source of market volatility.
This paper examines potential implications, complexities and risks associated with the proliferation of consumer-facing decentralized finance (DeFi) applications within financial services. It provides a taxonomical overview of DeFi applications and identify four key risks for managers, practitioners and scholars.
* The views expressed herein are those of the author and should not be attributed to the International Monetary Fund, its Executive Board or its management.